Why Startups Need HR

Most startups fail. Fact! This is arguably part of the startup or entrepreneurial business process. Furthermore, most startups and small to medium sized businesses also fail to realize the importance of specific HR functions. The argument is that startups need HR as much as, or considerably more than established businesses. The human component is key to the success of most startups and as such, for the tech mastermind, creative designers or other startup business leaders, you must have professional HR functions to support you and keep your best resources happy, well and as productive as possible.

Startups Fail

The numbers don’t lie and as of 2019, the US startup failure rates were around 90%, 21.5% in the first year, 30% in the second year, and 50% in the 5th year. Most small businesses started will thus fail. The reasons are varying and numerous, but it is clear that poor people management for startups is one of the failure factors.

Startups need to be able to fail and start again, or grow and adapt – either way there is a flexibility that is innate and expected of successful startups. The only way that this is possible is with highly professional HR and processes and systems that allow for such flexibility and adaptability.

The Specific HR functions that all startups need


Having the right people at the right time sounds like a right cliché, yet it is one of the most definitive aspects of a successful business. Who and what your business becomes, will to a large part depend on who you hire to help you realize the dream. Allow the professionals to do this. Talent hunting and recruitment is a specific skill – let them know what it is your business needs and let them find it for you.

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Developing and training

Once you have the talent, there must be a training and development plan, either for the specific job at hand or as the business develops and changes you will need your human resources to be able to keep up. As a new product, or service becomes available, so too will the need for specifically trained support, sales and marketing personnel.

Retaining talent

Once the team is set up and working as it should, your business will need to keep the talent. After the investment of time and money having recruited and trained your staff, it would be a significant business loss for your business if your employees then find greener pastures. Renumeration, benefits and other productivity-related bonuses can be a nightmare to set up and implement, yet are proven to be key ways to retain the right staff.

These are three core HR functions that failed startups have scoffed at, believing that they will be able to manage these aspects of the business internally or believe that they do not need additional specific human resources. It’s a mistake that many have come to regret.

This article has detailed why the HR function is vital to the possible success of a startup and continued success of small to medium sized businesses.

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